Question

Orem Corporation's current liabilities are $87,300, its long-term liabilities are $293,700, and its working capital is $122,200. If the corporation's debt-to-equity ratio is 0.15, total long-term assets must equal:

Multiple Choice

• $2,540,000

• $2,798,800

• $2,711,500

• $2,129,500

Answer 1

Answer is $2,711,500

Working capital = Current assets - Current liabilities
$122,200 = Current assets - $87,300
Current assets = $209,500

Total liabilities = Current liabilities + Long-term liabilities
Total liabilities = $87,300 + $293,700
Total liabilities = $381,000

Debt-to-equity ratio = Total liabilities / Total equity
0.15 = $381,000 / Total equity
Total equity = $2,540,000

Total assets = Total liabilities + Total equity
Total assets = $381,000 + $2,540,000
Total assets = $2,921,000

Total assets = Current assets + Long-term assets
$2,921,000 = $209,500 + Long-term assets
Long-term assets = $2,711,500